Brokerages are all over the board in terms of revenue, as some are struggling and losing revenue for a multitude of reasons, while others are having their best performing years ever, explains industry consultant Kevin Trokey.
Trokey, through his company Q4intellegence, is working with agencies that are having record years in terms of top-line growth, but there are so many pressures on the revenue stream right now that it is leading to completely separate paths for agencies across the country, Trokey says.
Those brokers who are having their most successful years have “gotten out of selling health insurance and gotten into selling compliance services and enrollment and that sort of thing,” adds Randy Schwantz, CEO of broker consultancy The Wedge Group in Dallas. “It’s a more complex world than has been in past. [Brokers] are solving these complexities, winning a lot of business and growing fast.”
Trokey explains it is the same story at large and small companies. “It all goes back to the Affordable Care Act and medical loss ratio provision, and carriers using MLR — whether legitimate or as an excuse — bonuses aren’t what they used to be,” Trokey says.
In addition, the commission structure is getting cut to per employee, per month. “PEPM then gets further cut, when businesses are running leaner than ever before. And in some instances, commissions are getting cut entirely,” Trokey adds. But that presents opportunity, he explains, “to take back control.”
For those that fail, it is a similar story to why video rental chain Blockbuster closed down, Schwantz explains. “They were incapable or blind to changes and therefore [were] operating in the old world versus the new world,” he explains.
15 key performance indicators
Trokey suggests agencies track 15 key performance indicators, which “are … basic numbers that tell the story of a business,” and include average revenue per employee, average revenue per support staff, operating profit. “Things that seem like obvious measures that the industry should have been tracking as a whole and just haven’t,” he says.
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In addition to tracking KPIs, Trokey reminds agents that they are expected to give advice and get results, rather than place products. “I tell agents, ‘You are not in the product business, you are in the advice business,’” he says. “Insurance products [are] one opportunity,” but there is also tech solutions, compliance and more.
The time has “never been greater for [brokers] to take control and stabilize revenue,” he adds. “Those that embrace that are having their best production years ever.”
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